This question originally appeared on Quora: How do so many CEOs fire people on the spot without any apparent consequence?
Answer by David S. Rose, Entrepreneur, Angel Investor, Mentor, Entrepreneurship Chair at Singularity University, on Quora
That's the difference between European and American business. While the UK is arguably farther to the conservative side of the spectrum than most of
One can absolutely make a case for why the business world should be as it is in Europe (or quite a few places in South America, for that matter), but there is the unquestionable fact that the United States has an infinitely more entrepreneurial zeitgeist and is a significantly more robust epicenter for innovation than anywhere in Europe.
So without in any way making a value judgement, let me try to clarify why even the thought of opening a subsidiary anywhere in Europe gives American entrepreneurs the heebie jeebies:
In the U.S., absent any negotiated agreement between employer and employee (or an employee's collective bargaining union, which does not apply to 99% of startups or tech companies),
Employment is completely at will, and there are no federally imposed requirements whatsoever on the employer/employee relationship*
That's right:
- Any employee can be terminated at any time for any non-discriminatory reason, with no notice and no severance payment.
- There is no required number of vacation days, sick days, or even national holidays.
- For 'exempt' employees (all managers and many salaried knowledge workers) there is no minimum or maximum on the number of hours worked, and no requirement for overtime pay.
- There is no required retirement or pension plan contribution.
- There is no requirement for paid sick, maternity, paternity, or even jury leave
When you further take into account US bankruptcy laws, which put absolutely no personal restrictions or record on anyone involved in the failed company, the result is that it is much, much easier to establish, operate, upsize, downsize, pivot or close a business than it is anywhere in Europe.
* The sole laws relates to business requirements for employee's private health insurance options under the recently passed Patient Protection and Affordable Care Act (which itself, to many conservatives, marked the beginning of the Apocalypse), and societal protections against discrimination, including against those with disabilities.
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